Tuesday, July 26, 2011

Republican v. Democrat and the USD

Just got the following note on the direction of the USA dollar.  I think the Republican/Democrat posturing is political in nature and the start of the 2012 Presidential Election.  Something will get done, it would be far to irresponsible to not do anything.  It is a high stakes game of chicken. 

I wanted to send another email update as the Canadian dollar is currently sitting at a four year high. I have received quite a few phone calls inquiring about the debt crisis in the US and the approaching August 2nd deadline and how this is going to affect the Canadian dollar. After its rapid appreciation last week, the Canadian dollar has been making fresh new four-year highs this morning against the struggling Greenback. Concern that US lawmakers will not reach an agreement to raise the limit on the country’s debt ceiling saw traders further diversify their holdings outside the falling USD. The Loonie’s performance trailed that of its “commodity-linked” peers, the Australian and New Zealand dollars, which both have much less exposure to the weak US economy than Canada, who relies on the United States as its largest trading partner.
After its positive overnight performance, the Loonie is finally sitting comfortably in the 1.05s and continues to try to gain strength. A weakening USD is giving commodity prices a boost as oil is trading marginally higher and gold is also posting slight gains. The Canadian dollar should continue to see resistance if it attempts to strengthen further, though it has been making impressive gains against the USD of late.
On the data docket, Canada has nothing major for the balance of the week until Friday, when we receive monthly GDP figures, which will as always be watched closely. With the US dollar selling off across the board overnight the usual suspects are outperforming this morning. With the August deadline quickly approaching, little progress was made once again in coming to a resolution that both Democrats and Republicans could agree on. President Obama addressed the nation yesterday and warned of a “deep economic crisis” if a compromise was not reached. The full impact of a default (or more likely a technical downgrade of the United States’ credit rating) is not fully known.
If you would like to put a market order in to target a specific rate or you would like to know the exact rate we are trading at, please give me a call. I look forward to speaking with you soon.

Annelies van der Made, BComm
Private Client Manager - Foreign Exchange Broker

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